In other words, rather than the Fed promising to keep rates low
until 2015 (or some other arbitrary date) the promise is now to
keep rates low until we've hit either 6.5 percent unemployment or
2.5 percent inflation.

The key paragraph:

To support continued progress toward maximum employment and price
stability, the Committee expects that a highly accommodative
stance of monetary policy will remain appropriate for a
considerable time after the asset purchase program ends and the
economic recovery strengthens. In particular, the
Committee decided to keep the target range for the federal funds
rate at 0 to 1/4 percent and currently anticipates that this
exceptionally low range for the federal funds rate will be
appropriate at least as long as the unemployment rate remains
above 6-1/2 percent, inflation between one and two years ahead is
projected to be no more than a half percentage point above the
Committee’s 2 percent longer-run goal, and longer-term inflation
expectations continue to be well anchored. The Committee views
these thresholds as consistent with its earlier date-based
guidance. In determining how long to maintain a highly
accommodative stance of monetary policy, the Committee will also
consider other information, including additional measures of
labor market conditions, indicators of inflation pressures and
inflation expectations, and readings on financial developments.
When the Committee decides to begin to remove policy
accommodation, it will take a balanced approach consistent with
its longer-run goals of maximum employment and inflation of 2
percent.

When the Fed announced "QE open-ended" this summer, it was always
clear that the Fed was going to
start defining the key economic levels that it would look for
in order to give the market a clear definition of when the
economy was strong enough to stop loosening.

BI: So in the meantime do you expect the Fed to adopt
something close to an Evans Rule, where it’s not necessarily NGDP
targeting, but where they’d get rid of the date-based targets and
come up with some other threshold?

HATZIUS: That’s very much the
signal that I would take away from what we’ve heard over the past
couple of months. In particular,
the speech by Janet Yellin the day before the last set of
FOMC minutes – and it's very much for the reasons that
Woodford made out in his Jackson Hole paper – which is that
they’re conceptually much happier with forward guidance that
specifies how the economy performs as opposed to forward guidance
that's specified in the calendar.

So my expectation is that they will adopt an Evans-style rule or
threshold guidance, probably not at the meeting next week, but I
would expect it for sometime in the first quarter.

One thing I would say is I don’t think it’s a done deal yet.

While I expect it, I don’t think it’s a 90 or 95 percent
probability.

It’s still an ongoing discussion and there are a number of
practical issues that have to be sorted out, one of which was
illustrated in
(Friday's) employment report, namely the fact that the
unemployment rate can fall for reasons that don’t really indicate
a stronger labor market because of declines in labor force
participation, which basically means the unemployment rate may
not be such a good indicator of how the broad labor market is
performing or how the overall economy is performing.

The less direct correspondence we have between where the
unemployment rate is, ,what the overall economy is doing and what
the overall labor market is doing, it gets trickier to adopt this
sort of threshold guidance. Another issue is that I don’t think
it’s clear how you would define the threshold guidance in terms
of inflation. You don’t want to use headline inflation because it
can move for spurious reasons like commodity shocks, which don’t
really tell you what monetary policy should do.

On the other hand, the Fed has basically said in the minutes,
that they don’t want to talk about core inflation anymore. They
don’t want to talk about core inflation or even underlying
inflation, and it’s sort of put a little bit of a shift in their
position if they now specify the inflation threshold for
tightening in terms of the core measure of inflation.

This has been a year of incredible evolution for the Fed, and
this trend continued in its final meeting of the year.